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A one-size-fits-all approach does not work while picking insurance plans. It is important to chalk-out one’s own goals, and take the first step in the journey of making insurance, particularly life insurance, an integral part of your future and financial planning.
Life insurance is a very important part of our personal financial planning. It is all about securing you and your family financially. Employee Deposit Linked Insurance (EDLI) is a mandatory insurance scheme for private sector employees who are enrolled in EPF. This scheme was launched by the Union government in 1976 and managed by Employees’ Provident Fund Organisation (EPFO). The main objective behind this scheme is to provide social security benefits to private sector employees.
Enrolment
There is no need for employees to enrol separately for EDLI scheme. All employees who subscribe to the EPF scheme are automatically enrolled for this facility. Age and other individual factors do not affect any employee’s eligibility under this scheme.
Premium
No contribution is payable by the employees for availing insurance cover under the EDLI scheme. According to law, the employer makes a contribution which is minimal. Every month, 0.5% of the salary is contributed towards EDLI by the employers and by the government.
Benefits
In the event of the death of an insured employee during the service period, the nominee is eligible to get the death benefit. If a nominee is not mentioned under the insurance scheme, legal heirs get the lump sum pay-out.
The nominee or family member or legal heir is eligible to receive a lump sum pay-out of up to Rs 7 lakh in case the insured person dies due to natural causes or accident or illness. The minimum insurance payable under this scheme is Rs 2.5 lakh.
Quantum of insurance
The amount of insurance is equal to 30 times the average salary (basic and DA) drawn in the past twelve months. However, maximum salary is capped at Rs 15,000. Apart from this, a bonus of Rs 2.5 lakh is payable.
Insurance claim
In case of death during active service, the family or nominee needs to fill form 5IF and submit it along with a death certificate and few other documents. The employer will need to sign and certify the form. If this is not possible it can be attested by a gazetted officer/ magistrate or local MLA.
While the form can be downloaded on the EPF website, it needs to be filled offline and submitted to the EPF Commissioner’s office to process the claim.
The bottomline
The Employees’ Provident Fund Act allows some organisations to opt out from the EDLI scheme. According to law, if companies choose life policies for their employees from other insurers that are more attractive than the EDLI they can opt out.